The Chairman said that the special meeting was arranged at the suggestion of the Administration for the purpose of briefing members on the Housing Demand Model to be used in the Long Term Housing Strategy (LTHS) Review.

2. At the invitation of the Chairman, Dr E G Pryor highlighted salient points in the information paper with the aid of presentation materials at the Appendix. He said that the assessment on housing demand was a key element in setting housing production targets alongside with other factors such as land and capital resources and strategic policy decisions. Housing demand varied according to economic conditions, population fluctuations and policy decisions which might create housing needs as in the case of squatter clearances. For planning purposes, it was necessary to have a model which would provide a range of estimates of future demand derived from a series of pre-determined calculations to be applied to the latest available assumptions, policies and trends. The current housing model centred on four steps for projecting the flat production requirements for public and private sector housing. The first step was to calculate the total housing need over a 10-year period; this would encompass the number of existing or new households requiring adequate housing. The second step was to apply a Splitting Ratio (SR) to separate the total housing need between the public and the private sectors, based on technical working assumptions in particular those concerning household income and housing preferences. The third step was to convert housing need into housing demand for each sector. Unlike the public sector where housing need was assumed to be equal to housing demand subject to the availability of resources, demand in the private sector was constrained by affordability. Finally and as the fourth step, public and private housing demand were translated into flat production requirements. A safety margin would be included in the public housing production programme to safeguard against possible slippage, and a Flat Production Ratio would also be applied to allow a margin for flats used as second homes or for investment purposes in the private sector. Dr Pryor supplemented that the same model would be used to re-calculate the demand assessment to take into account the latest changes in policies or trends.

Model Structure

3. In reply to members on the difference between the current model and the one adopted for the 1987 LTHS, Dr Pryor advised that both models adopted a similar process of logic in assessing housing demand. The Mark II model currently used, which was similar to the Mark I model used in 1987, was more sophisticated and user-friendly and could be applied flexibly on different assumptions made according to the Administrations policy objectives, availability of resources and development priorities, etc. The current model was also capable of adjustment to new policies or drastic changes which might have an impact on housing demand. Where concrete statistical data were not available to support the contentions, corporate views from the best informed persons would be adopted. Some members expressed doubt on the effectiveness of the model in sizing up the actual public demand and held the view that an under-estimation of housing needs in 1987 had given rise to a serious shortfall in the supply of public housing units and the long waiting list nowadays. Members requested the Administration to provide more details on the difference between the current model structure and the one adopted in 1987.

Total Housing Needs

4. Members enquired if individual surveys on each of the 14 components of housing needs could be undertaken to ascertain the reliability of the respective SRs between public and private housing. Dr Pryor advised that it would be impractical, costly and time consuming to conduct separate surveys as suggested. Miss L K LAM and Mr C M LEE explained that the results of a number of statistical surveys had been used to provide working assumptions for the model. A special survey on housing aspiration, to be completed in early 1997, would soon commence. The findings of the survey would be used to substantiate some of the working assumptions.

5. Members suggested that more scenarios should be developed for deriving housing demand and production targets. Dr Pryor confirmed that scenarios would be built to reflect different policy assumptions but the important point was to relate the forecasts in demand to land supply and flat production.

6. Members sought elaboration on how the safety margins referred to in Figure 1 of the information paper had been derived. Dr Pryor advised that public housing programmes related closely with the New Territories Land Production Programme. He assured members that measures were in place to link the needs of the public housing sector with the provision of land in an effective manner. The general approach was to split the 10-year assessment period into two 5-year periods. The safety margin for the first five-year period was set at 5% according to past trends and a much higher safety margin would be expected in the subsequent period to take into account changing circumstances such as the availability of resources, land supply and clearance problems.

New Housing Needs

7. Members considered that the actual housing demand of the Divorces component had been under-estimated. The 27% Accommodation Generation Rate (AGR) referred to in paragraph 3B of Appendix I to the information paper had been projected on the assumption that only half of the households would be generated from the original households which, in members views, did not reflect the actual situation. They sought clarification on how the SR of 25% public rental housing (PRH): 25% Home Ownership (HOS): 50% private housing (PH) in paragraph 3 of Appendix II had been derived.

8. Mr LEE explained that according to the 1991 Census, about 54% of divorced persons were found to be living in singleton households or as heads of unextended nuclear families. It was assumed that half of these households were formed from the original households and thus had no additional needs for housing. In other words, only 27% of the divorced persons would require additional housing upon divorce. On the second point concerning SR, Mr LEE said that this was based on the results of the General Household Survey (GHS) with some adjustments. For example, some households with income below the HOS income limit might prefer to buy private flats and some households with income below the waiting list income limits might prefer HOS flats.

9. Members considered the estimated potential housing needs at 9,125 per year for legal immigrants from China unrealistic taking into account the arrival of over 55,000 such immigrants per year, and sought elaboration on the assumption that only 17% of such immigrants had housing needs upon arrival in Hong Kong. Miss LAM explained that the figure was based on data from the Census and Statistics Department. It was estimated that 9,125 of the 55,000 legal immigrants would become heads of unextended nuclear families of which 80% would actually acquire accommodation. On the basis of 3.5 members per household, the estimated number of legal immigrants involved would be 25,500 (9,125 x 0.8 x 3.5) per year. This figure however had yet to be confirmed. Dr Pryor supplemented that the process for deriving these figures was carefully designed to avoid double counting. The splitting of legal immigrant households sharing accommodation with relatives would be considered separately under the component on Splitting of complex family structure.

Generated Housing Needs

10. Members sought clarification on whether the housing need referred to in the information paper had been made on the assumption that all squatters would be cleared within the next 10 years. Some members were of the view that the findings on income level from the 1991 Census should not be applied to the component of Clearance of Temporary Housing Areas/Cottage Areas (CAs)/Squatters since affected tenants of the Comprehensive Clearance Programme were not subject to income assessment under existing housing policies.

11. In response, Dr Pryor advised that the Housing Department was acting as an agent of the Government to clear the CAs and squatters. The housing needs of legal occupiers of squatters on crown land had already been built into the model. On the second point, Mr LEE advised that the 1991 Census findings on income level were not applied to the component Clearance of temporary housing areas/cottage areas/squatters.

Other Housing Needs

12. In reply to members, Dr Pryor advised that co-tenants of shared units in PRH were not included in the component on Inadequately Housed Households (IHH).

13. Members questioned the rationale for setting a higher ratio of HOS as compared to that of PRH for the IHH, and commented that the actual housing demand of the IHH far exceeded the AGR of 4% since this percentage only represented a suppressed figure. Mr LEE advised that the SR for IHH was based on the 1991 Census results and the AGR on past trends. Any change in housing policies would be reflected in the working assumptions for the Housing Model. Dr Pryor supplemented that the rate served only as a statistical projection for the model in calculating the housing need for this specific component.

Sectoral Housing Needs

14. Members were not convinced that the SR of public and private housing should be changed from 63% : 37% to 50% : 50%. They firmly believed that such a change would have significant impact on the formulation of future housing policies and sought clarification on the rationale and justifications for such a change.

15. Mr LEE advised that the SR referred to was derived by reference to the GHS (1994) and was adjusted to take into account households with low income aspiring to live in private flats or to purchase HOS flats. Dr Pryor supplemented that sampled surveys in general could have a variation in reliability up to 10%. He conceded that some of the working assumptions required statistical evidence, and the Administration would soon commission a survey on housing aspiration to substantiate some of the working assumptions.

16. Members sought clarification on whether the SR of 25% PRH : 35% HOS : 50% PH represented an overall figure or whether the figure required revision. Miss LAM advised that the figure referred to was only an illustration of a particular component and was by no means an overall figure.

Flat Production Requirements

17. In referring to the flow chart in Appendix IV, Dr Pryor advised that flat production requirements would be matched with the flat supply potential of existing and planned housing land. Several rounds of matching would be required to achieve a balance between demand and supply. Members were worried that the waiting time for public rental housing would be lengthened in the event suitable sites were not available. Dr Pryor emphasised that every effort would be made to increase flat supply. The important point was to accelerate land formation programmes and infrastructural provisions.

18. In reply to a related question, Dr Pryor advised that the Administration had completed the first round of baseline demand estimates and was in a position to conduct a comparison on demand and supply.

19. Members considered that the Administration should work out the total flat production requirements for the next 10 years and on that basis assess the envisaged shortfall in flat supply to facilitate formulation of corresponding policies and plans. They also asked whether the Administration would consider making up the shortfall in private housing by public housing.

20. Dr Pryor re-iterated that the best solution to resolve the shortfall was to get on with the long term planning on land production in order to increase land supply. On the second point, Dr Pryor advised that contribution of the private sector in housing supply had increased eversince the revamping of the Building (Planning) Regulations in 1956 to allow the construction of high-rise buildings. Participation of the private sector was nevertheless constrained by a number of factors, such as the provision of land, availability of loans, price of concrete, etc. The Administration took the view that every potential resources in the community would be used to tackle the problem of shortfall in flat supply.

21. Members requested that the report of the Working Group be released for public consultation as soon as practicable. Mr David K Gibson advised that the recommended production targets had yet to be mapped out taking into consideration changes in working assumptions. He assured members that the final report would be submitted for the Panels scrutiny upon completion, to be followed by public consultation.

22. There being no other business, the meeting closed at 5:00 pm.

LegCo Secretariat
15 July 1996

Last Updated on 20 Aug, 1998

LegCo Panel on Housing

Minutes of Special Meeting held on Tuesday, 23 April 1996 at 2:30 pm in the Chamber of the Legislative Council Building

Minutes of Special Meeting held
on Tuesday, 23 April 1996 at 2:30 pm
in the Chamber of the Legislative Council Building